What is COMMODITY MONEY? What does COMMODITY MONEY mean? COMMODITY MONEY meaning & explanation

BROWSE The Internet EASY way with The Audiopedia owned Lightina Browser Android app. INSTALL NOW - https://ift.tt/2SipMz9 What is COMMODITY MONEY? What does COMMODITY MONEY mean? COMMODITY MONEY meaning - COMMODITY MONEY definition - COMMODITY MONEY explanation. Source: Wikipedia.org article, adapted under https://ift.tt/yjiNZw license. Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects that have value in themselves (intrinsic value) as well as value in their use as money. Example of commodities that have been used as mediums of exchange include gold, silver, copper, salt, peppercorns, tea, large stones (such as Rai stones), decorated belts, shells, alcohol, cigarettes, cannabis, silk, candy, nails, cocoa beans, cowries and barley. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or price system economies. Commodity money is to be distinguished from representative money which is a certificate or token which can be exchanged for the underlying commodity, but only as the trade is good for that source and the product. A key feature of commodity money is that the value is directly perceived by the users of this money, who recognize the utility or beauty of the tokens as they would recognize the goods themselves. That is, the effect of holding a token for a barrel of oil must be the same economically as actually having the barrel at hand. This thinking guides the modern commodity markets, although they use a sophisticated range of financial instruments that are more than one-to-one representations of units of a given type of commodity. Since payment by commodity generally provides a useful good, commodity money is similar to barter, but is distinguishable from it in having a single recognized unit of exchange. (Radford 1945) described the establishment of commodity money in P.O.W camps. People left their surplus clothing, toilet requisites and food there until they were sold at a fixed price in cigarettes. Only sales in cigarettes were accepted – there was no barter Of food, the shop carried small stocks for convenience; the capital was provided by a loan from the bulk store of Red Cross cigarettes and repaid by a small commission taken on the first transactions. Thus the cigarette attained its fullest currency status, and the market was almost completely unified. Radford documented the way that this 'cigarette currency' was subject to Gresham's law, inflation, and especially deflation. In another example, in US prisons, after smoking was banned circa 2003, commodity money has switched in many places to cans or foil pouches of mackerel fish fillets, which have a fairly standard cost and are easy to store. These may be exchanged for many services in prisons where personal possession of currency is prohibited. In situations where the commodity is metal, typically gold or silver, a government mint will often coin money by placing a mark on the metal that serves as a guarantee of the weight and purity of the metal. In doing so, the government will often impose a fee which is known as seigniorage. The role of a mint and of coin differs between commodity money and fiat money. In situations where there is commodity money, the coin retains its value if it is melted and physically altered, while in a fiat money it does not. Usually in a fiat money the value drops if the coin is converted to metal, but in a few cases the value of metals in fiat moneys have been allowed to rise to values larger than the face value of the coin. In India, for example fiat Rupees disappeared from the market after 2007 when their content of stainless steel became larger than the fiat or face value of the coins. In the US, the metal in pennies (97.5% zinc since 1982, 95% copper in 1982 and before) and nickels (75% copper, 25% nickel) has a value close to, and sometimes exceeding, the fiat face value of the coin. Although some commodity money (barley) has been used historically in relations of trade and barter (Mesopotamia circa 3000 BC), it can be inconvenient to use as a medium of exchange or a standard of deferred payment due to transport and storage concerns, and eventual rancidity. Gold or other metals are sometimes used in a price system as a store of perceived value that does not break down due to environmental deterioration and that can be easily stored (demurrage).....